California Supreme Court Issues Consumer-Friendly Arbitration Ruling

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The year 2017 has brought in several consumer-friendly arbitration rulings, with several federal appellate courts refusing to enforce arbitration clauses.   Today, the California Supreme Court followed suit, ruling that a Citibank arbitration provision did not bar its customers from proceeding in court with claims seeking a public injunction under California consumer protection law.

Dating back to 1999, in its decision in Broughton v. Cigna Healthplans of California, 21 Cal.4th 1066 (1999), the California Supreme Court has held that California law does not permit arbitration of claims brought for broad, public injunctive relief.  The Court reaffirmed that principle in 2003 in Cruz v. PacifiCare Health Systems, Inc., 30 Cal.4th 303 2003).  And it has remained in effect, at least in California state courts, ever since.

The US Supreme Court’s Concepcion decision in 2011 engendered doubt as to whether the Broughton and Cruz decisions remain in effect, or whether they are instead preempted by the Federal Arbitration Act.  A series of district court decisions in 2011 and 2012 reached differing outcomes, and the Ninth Circuit ultimately ruled in Kilgore v. KeyBank N.A. that the FAA does preempt the Broughton-Cruz rule.

Today’s California Supreme Court ruling in McGill v. Citibank appeared poised to either contradict or fall in line with Kilgore.  … Read more

BMS v. Superior Court Shouldn’t Affect Personal Jurisdiction in Class Actions, Solicitor General Says

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We’ve been closely watching the pending U.S. Supreme Court case Bristol-Myers Squibb Co. v. Superior Court, because the personal jurisdiction question put to the Court could greatly affect where (and how) mass torts are litigated. In this case, California plaintiffs and nonresident plaintiffs are suing BMS for injuries allegedly caused by Plavix, a cardiovascular medication that the company created and marketed in the US. The Court is being asked to decide whether Bristol-Meyer Squibb’s California activities are sufficiently related to the nonresident plaintiffs‘ suits to support their invocation of specific jurisdiction in California.

A lingering question in our minds has been whether the answer to this question would also resolve questions regarding personal jurisdiction in class actions in which a single court is asked to rule on class claims of resident and non-resident plaintiffs. The (acting) Solicitor General has now filed an amicus brief in support of BMS, and his answer–No–is quite the surprise.

Here’s what the SG had to say:

The issue before the Court, as framed by Bristol-Meyers Squibb, is “whether a plaintiff’s claims arise out of or relate to a defendant’s forum activities when there is no causal link between the defendant’s forum contacts and the plaintiff’s claims—that is, where the plaintiff’s claims would be exactly the same even if the defendant had no forum contacts.”

This case does not present any question concerning whether a state court may entertain class actions, under established rules, to resolve claims arising from conduct in multiple jurisdictions.… Read more

3d Cir. Refuses to Compel Arbitration

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Last week, the Third Circuit was presented with an arbitration issue that dealt with, as the court put it, “an unusual hybrid of technology.”  The defendant had offered services through an interactive telephone system.  But the contract that purportedly bound plaintiffs to arbitration was located exclusively on defendant’s website.

Because of the disconnect between the phone-based interaction between the parties, on the one hand, and the web-located terms of service, on the other, the court declined to compel arbitration.  James v. Global TelLink Corp., — F.3d —, 2017 WL 1160893 (3d Cir. 2017).

The court emphasized that while defendant informed telephone users their service was governed by website terms, users were not required to visit the website or otherwise demonstrate acceptance of the website’s terms.

The Third Circuit then distinguished various lines of cases.  It distinguished cases where plaintiffs had “manifested assent through the affirmative act of signing contracts”; where the contractual terms had been “immediately accessible to online users”; where plaintiffs had “received a copy of the contract with their [purchase] and conceded that they had notice of the [relevant] clause”; and where the plaintiffs “received physical copies of the terms and conditions upon opening the products, and their subsequent use of the products manifested assent.”

The court concluded by emphasizing that while arbitration is a favored remedy where the parties assent to its use, arbitration cannot be compelled where one party did not agree to arbitrate:

Congress has made clear that arbitration is an important federal policy and the Supreme Court has vindicated that policy many times.

… Read more

Beware Intended Consequences of Class Action Reform, Too

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Dave and I wrote this article for Law360, which was published today. Here it is in its entirety.

On March 8th, Law360 published an article from two class action defense lawyers who argue that the anti-class action bill currently working through Congress (known as H.R. 985) doesn’t go far enough in its quest to “stem[] class action litigation.”  They call in particular for legislation designed to mitigate the “in terrorem effect” that they insist causes corporations to “settle truly meritless claims.”

This in terrorem boogeyman has been trotted out for decades, every time that a pretext is needed to close the courthouse doors to victims of corporate abuse.  Let’s shoo away the boogeyman this time around, rather than again allowing dramatic changes to the law.  There are many good reasons to do so.

For one, studies of class actions and class settlements—including by the Federal Judicial Center—do not support the intensely negative view of litigation as blackmail.[1]  “[T]he class action is more nearly a shield than a sword.  It has protected companies from bankruptcy, but it appears to have rendered few companies insolvent, if any.”[2]

The blackmail analogy has no empirical backing. Again and again, scholars have debunked the myth that class actions foster extortionate claims.… Read more

Class Cert Appeals & the Muddy Waters of the 9th Circuit

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In less than two weeks, the Supreme Court will hear oral argument on the following issue: Whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.

The underlying decision, which we’ve written about previously, is the Ninth Circuit’s ruling in Baker v. Microsoft.  In Baker, the district court struck class allegations, Plaintiffs sought leave to appeal under Federal Rule of Civil Procedure 23(f), and leave was denied.  Plaintiffs then voluntarily dismissed their individual claims with prejudice and appealed.  The Ninth Circuit concluded it had jurisdiction because the dismissal – even though it came by stipulation – was “sufficiently adverse” to be an appealable final decision.

With the Supreme Court poised to rule in Baker, the Ninth Circuit recently issued a second published decision involving a similar issue. Bates v. Bankers Life & Casualty Co.  In Bates, as in Baker, the district court granted a motion to strike class allegations.  From there, the posture of the cases diverged.  Rather than voluntarily dismissing with prejudice (as in Baker), the Bates plaintiffs filed an unopposed motion for entry of final judgment pursuant to Federal Rule of Civil Procedure 54(b).… Read more

Public Outcry As Republicans Push Radical Bill to Kill Class Actions

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Here’s an update on the status of the Fairness in Class Action Litigation Act of 2017 (H.R. 985), which we first touched on in an earlier post. Today, the bill was voted out of the House Judiciary Committee along party lines by a 19-12 vote, without making a single change and without holding a single hearing.

Introduced just last week, the bill has already generated sweeping opposition, including from the American Bar Association and its 400,000 attorney members, as well as consumer-, environmental-, disability-, labor- and civil-rights groups. The ABA letter opposes the bill because it would cut access to courts. The civil-rights groups’ and advocates’ letter, which includes 120 signatories, contends this “poorly drafted legislation will create needless chaos in the courts without actually solving any demonstrated problem.” The disability-rights groups did not mince words, either; “H.R. 985 would be devastating to the rights of people with disabilities.” For their part, the consumer, environmental, and labor groups’ joint letter slams the bill as “sweeping, reckless legislation” and calls the House Judiciary Committee’s consideration of this monumental bill without holding a single hearing “an outrage.”

So there you have it: a House Judiciary Committee unwilling to hold even a single hearing on radical limitations on the right of the injured and helpless to band together to seek relief in court, and a public swiftly organizing to resist.… Read more

9th Circuit Affirms Class Certification in RICO Suit

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Last week, the Ninth Circuit affirmed certification of nationwide classes in a suit featuring RICO, contract, and other claims.  The published opinion dealt with a range of issues, including typicality, predominance, and superiority.

The case is Just Film, Inc. v. Buono.  No. 14-16132, 2017 WL 510452 (9th Cir. Feb. 7, 2017).  The full opinion is worth a read; a few highlights follow.

Typicality

One argument defendants raised was that the named plaintiffs’ injuries differed from the injuries suffered by other class members.  The Ninth Circuit held that the differing injuries did not defeat typicality:

The requirement of typicality is not primarily concerned with whether each person in a proposed class suffers the same type of damages; rather, it is sufficient for typicality if the plaintiff endured a course of conduct directed against the class. Although Campbell was able to fend off the attempted fraud before it reached into and diminished her bank account, there is no reason why she cannot prove the nature of the fraudulent scheme for benefit of all class members, whether or not their precise injuries are identical.

Predominance

Defendants challenged predominance on several grounds, including that damages would vary by class member and would require individualized evidence.  … Read more

House Republicans Push Radical Class Action Reforms

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Last Wednesday, Congressman Bob Goodlatte (R-Va.), Chairman of the House Judiciary Committee, introduced the Fairness in Class Action Litigation Act of 2017 (H.R. 985), a sweeping set of proposals that would effectively kill many class actions.

The bill proposes to:

  • require that “the party seeking to maintain such a class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives” (This poorly worded proposal was widely panned as the “Volkswagen Bailout Bill” when Rep. Goodlatte last introduced it in 2015, because it would have wiped away class actions and excused the worst corporate misconduct.)
  • require a class action complaint to identify whether the named plaintiff has ever been represented by class counsel before; if yes, no class action may be certified (Don’t we want plaintiffs to be represented by experienced counsel, and why does a prior representation automatically foreclose a future class proceeding where the same attorney represents the same client?)
  • restricts attorney fee awards (Courts, of course, already closely scrutinize class recoveries and attorney fee awards.)
  • limit a court’s authority to certify issue classes by requiring that “the entirety of the cause of action from which the particular issues arise satisfies all the class certification prerequisites” (Because Judge Posner is wrong that it is more efficient, “in terms both of economy of judicial resources and of the expense of litigation to the parties,” to decide some issues on a class basis rather than all issues in separate trials, see Butler v.
… Read more

When is Food “Defective”?

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Judge David Carter of the Central District of California answered this question recently in the Peterson v. Costco Wholesale Co.  In Peterson, a Hepatitis A outbreak in the western United States was linked to the consumption of a berry mix sold at Costco locations.  Plaintiffs sued Costco, asserting strict liability and other common law claims.  Judge Carter certified nine single-state subclasses for the purposes of determining liability.

Most recently, the question posed at summary judgment was whether plaintiffs could “demonstrate any defect in the berry mix.”  Petersen v. Costco Wholesale Co., 2017 WL 187134, at *4 (C.D. Cal. Jan. 17, 2017).  An answer in the affirmative was needed for plaintiffs’ strict liability claim to proceed.

Costco argued there was no evidence of a defect, contending that plaintiffs should have to demonstrate that they each “ate berry mix that was actually contaminated with hepatitis A and thus each … was actually exposed to hepatitis A.”  Plaintiffs countered that the berry mix was defective because, anyone who ate the berries urgently needed to obtain a hepatitis A vaccination. And Costco replied that, if plaintiffs’ theory was accepted, then the court would be saying that as a matter of law, “a recall alone demonstrates defect in the recalled products.”

Judge Carter sided with the plaintiffs:

the mere fact of a recall is insufficient to render a defendant liable under a theory of strict products liability to everyone who purchased a recalled product.

… Read more

9th Circuit Finds Art III Standing Under Spokeo in TCPA Case

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After a longer delay than several other circuits, the Ninth Circuit has again provided analysis of the Supreme Court’s Spokeo decision – this time in the TCPA context.

In the TCPA context, a strong majority of courts appear to be in agreement that statutory violations give rise to concrete harm.  The Ninth Circuit agrees.

The panel in Van Patten v. Vertical Fitness Group, began its Article III analysis by citing Spokeo for the proposition that “’both history and the judgment of Congress play important roles’ in supporting our conclusion that a violation of the TCPA is a concrete, de facto injury.”

The court elaborated:

The TCPA establishes the substantive right to be free from certain types of phone calls and texts absent consumer consent. Congress identified unsolicited contact as a concrete harm, and gave consumers a means to redress this harm. We recognize that Congress has some permissible role in elevating concrete, de facto injuries previously inadequate in law “to the status of legally cognizable injuries.” Spokeo, 136 S. Ct. at 1549 (quoting Lujan, 504 U.S. at 578). We defer in part to Congress’s judgment….

[T]he telemarketing text messages at issue here, absent consent, present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the TCPA.

… Read more